The latest NBK Real Estate Brief stated: Real estate sales fell back sharply in July, their first meaningful drop for five months. There were 415 property transactions (residential, commercial and investment) registered at the Ministry of Justice, down some 42% on June and unchanged on a year ago.

After four straight months of very solid sales, the fall in transactions in July comes as something of a surprise. But these sales numbers can be erratic and it is possible that the dip was driven by an unusually large seasonal effect, with activity falling away as the summer travel season began. The timing of the travel season might have shifted this year, with Kuwaitis holidaying earlier than usual in order to return before Ramadan. If so, sales activity should eventually bounce back, once the traditionally slow Ramadan period is over.

Sector-wise, the residential and apartment segments were the key drivers of July's decline in sales. Activity in the commercial sector, by contrast, rose and had its best month this year (in sales value, KD 19.2m). (See below.)

In KD value terms, sales fell less sharply, by 33% to KD 118 million from KD 175 million in June. The drop was alleviated by a relatively strong month in the commercial sector, where transactions are typically of a larger value than in the more commonly-traded residential and apartment segments. The total value of sales is still up 18% on its weak levels of July 2009.

i) Sales – residential (mostly villas and land)

There were 317 residential sales in July, down some 38% from 510 in June but up 3% on a year earlier. This segment has seen a healthy recovery from the lows of mid-2008. July's drop was probably linked to the seasonal factors described above, rather than anything more long-lasting. In general, consumer confidence remains solid and lending conditions are more or less unchanged, suggesting little justification for a relapse in home sales. We estimate that land sales accounted for just over 40% of all residential transactions in July.

ii) Sales – investment (mostly apartments)

The number of transactions in the investment segment saw a huge fall in July to just 93, down 53% from June and down 4% on a year earlier. Sales had climbed spectacularly since the start of this year, however, so July's fall does not leave them at especially low levels. And – as in the residential segment – activity was likely heavily depressed by the vacation timings. In value terms, sales fell to their lowest level for ten months, at KD 31 million. The average value of investment segment transactions stood at KD 330,000. Once again, we would expect overall sales levels to bounce back later this year.

iii) Sales – commercial

The commercial segment was less affected by the summer season, seeing five sales, a slight improvement on the two seen in June. Those transactions were also of a healthy size, pushing the total value of sales to KD 19 million – the highest since November. Sales in this sector have seen no perceptible pattern over recent months, having ranged from a near record high to a near record low. There are hopes, however, that conditions in the sector will generally improve should the government push on with its four-year development program, which could boost the private sector's demand for office space.

Savings and Credit Bank loans

The NBK report concluded: July was also a weak month for loan approvals from the Savings and Credit Bank (SCB). There were 252 approvals in July, a drop of 7% from June and close to the low of 229 recorded in September 2009. In value terms, approvals even fell below last September's dire levels, at KD 6.4 million.

July approvals were probably affected by seasonality. But in general, the level of approvals this year has been very low. So far in 2010, the value of approvals has been 50% below that seen for the same period a year earlier. The most marked weakness remains in the approvals for new construction segment; this fell to just 26 in July, one of its lowest levels ever. Aside from the seasonal factors, this seems to suggest that the government's accelerated land distribution program – a key determinant of SCB loan demand – is yet to kick into gear.